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PETITIONER: THE TATA OIL MILLS CO., LTD.

       Vs.

RESPONDENT: WORKMEN & ANR.

DATE OF JUDGMENT: 15/02/1963

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1966 AIR 1672            1964 SCR  (2) 125  CITATOR INFO :  R          1972 SC 136  (22)  D          1991 SC 101  (15,156,179,225)

ACT: Industrial Dispute--Termination of service of an employee on payment  of one month’s salary in lieu of  notice--order  of termination  purported  to be discharge under R. 40  (1)  of Service  Rules--Jurisdiction  of  the  Tribunal  to  examine whether it amounts to a discharge or dismissal.

HEADNOTE: Mr. Banerjee was an employee of the appellant.  His services were  terminated on the ground that the appellant  had  lost confidence  in  him and in lieu of notice he  was  paid  one month’s  salary.  The union to which Mr.  Banerjee  belonged took up his cause and on the failure of the parties to reach a  settlement  the  matter was referred  to  the  Industrial Tribunal by the Government. The  appellant contended before the Tribunal that the  order of  termination of service of Mr. Banerjee was an  order  of discharge which it was competent to make under R., 40 (1) 126 of  the  Service Rules. it was contended by  the  respondent that the termination was not a discharge simpliciter but was in substance dismissal and that the Tribunal was entitled to consider the propriety of the appellant’s action. The Tribunal held that it had jurisdiction to look into  the reasons  behind the discharge of an employee.  On  the  exa- mination  of  the  evidence  the  Tribunal  found  that   no malafides  on the part of the employer had been  proved  and that   the  termination  of  service  did  not   amount   to victimisation  or unfair labour practice.  Even so  it  held that  the  discharge  was not  justified  and  directed  the reinstatement of Mr. Banerjee.  The present appeal is by way of special leave. Before  this Court, in addition to the above contention  the appellants  contented  that  in the light  of  the  evidence before  the Tribunal its finding that the discharge was  not justified, was wrong. Held,  that  in the matter of an order of  discharge  of  an employee  the  form  of  the  order  is  not  decisive.   An

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Industrial   Tribunal  has  jurisdiction  to   examine   the substance  of the matter and decide whether the  termination is in fact discharge simpliciter or it amounts to  dismissal which  has put on the cloak of discharge  simpliciter.   The test  always  has to be whether the act of the  employer  is bona  fide  or  whether  it is  a  malafide  and  colourable exercise of the powers conferred by the terms of contract or by the standing orders. Buckingham & Carnatic Co. Ltd. v. Workmen of the Company  95 (1951) II L. L. J. 314, chartered Bank, Bombay v.  Chartered Bank Employees Union (1960) II L. L..T. 222 and U. B. Dutt & Co.  (Private) Ltd. v. Its Workmen, (1962) II   L.L.J.  374, referred to. Since  the reasons given by the Tribunal in support  of  its conclusion were wholly unsatisfactory its order must be  set aside.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 322 of 1962. Appeal  by special leave from the Award dated September  13, 1961,  of the Second Labour Court, West Bengal, in Case  No. VIII-C-40 of 1960. M  .C    Setalvad, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant.  127 C.   K.  Daphtary, Solicitor General of India and  Janardhan Sharma, for the respondent No. 1 1963.  February 15.  The judgment of the Court was delivered by GAJENDRAGADKAR  J.--Mr. R. K. Banerjee had been employed  by the  appellant, the Tata Oil Mills Co. Ltd.as a Salesman  on April  3,  1956, as a probationer and he  was  confirmed  on November  5, 1956.  On December 5, 1959, his  services  were terminated  and he was informed that the appellant had  lost confidence in him, and so, it bad decided to discharge  him. Accordingly, in lieu of notice, he was paid a month’s salary and was told that he ceased to be the employee of the  appe- llant as from the date next after he received the order from the  appellant.  The discharge of Mr. Banerjee was  resented by the Union to which he belonged and the Union took up  his case.  Since the dispute could not be settled amicably,  the Union succeeded in persuading the Government of West  Bengal to  refer the dispute for adjudication to the Second  Labour Court  on  the  ground  that  the  said  discharge  was  not justified.  That is how the discharge of Mr. Banerjee became an   industrial  dispute  between  the  appellant  and   the respondents,  its workmen represented by their  Union.   The Labour Court which tried the dispute came to the  conclusion that  the appellant had failed to justify the  discharge  of Mr.  Banerjee  and  so, it has  directed  the  appellant  to reinstate  him and pay him full emoluments from the date  of his  discharge up to the date of his reinstatement.   It  is this  order  which  is challenged by the  appellant  by  its present appeal brought to this Court by special leave. The  material  facts  leading  to  the  termination  of  Mr. Banerjee’s  services  lie within a very narrow  compass.  in November,  1959 Mr. Banerjee was working in the  Assam  area and as such, had to work 128 as a Salesman at Dhubri, Bongaigoan, Rangia and Tejpur.  The appellant expected that as its Salesman Mr. Banerjee  should visit  dealers  in  his area and carry  on  intelligent  and intensive   propaganda  to  popularise  the  sale   of   the

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appellant’s  products.  The  appellant has a  Sales  ice  in Calcutta  and the manager of the said ice visits  the  areas within  his  jurisdiction to inspect the work  of  Salesmen. Accordingly  Mr.  Gupta  who was then  the  manager  of  the Calcutta  ice visited the area assigned to Mr. Banerjee,  in the  last week of October.  He found that Mr.  Banerjee  was networking satisfactorily as a Salesman.  In particular,  he noticed  that whereas Mr. Banerjee had reported to  the  ice that  the Bongaigoan Stockists had 20 boxes of dried up  and deshaped 501 Special Soap which could not be distributed  in the  market he had in fact not opened a single box  and  had not cared to satisfy himself that the soaps had either dried up or had been deshaped.  In fact, Mr. Gupta found that  the boxes  were  intact and he opened them and  discovered  that five boxes contained soap which had dried up and had  become deshaped, whereas the 15 other boxes were in good condition. Thereupon, Mr. Gupta made a   report to the zonal Manager on November  2,  1959, adversely commenting on  Mr.  Banerjee’s work.   The said report was in due course forwarded  to  the Head  ice  in  Bombay.  The Head  ice  then  instructed  the Calcutta Sales ice by telephone to send for Mr. Banerjee and call  for  his explanation.  Accordingly, Mr.  Banerjee  was sent  for  and his explanation taken; Mr.  Gupta  then  made another  report  expressing  his  dissatisfaction  with  the explanation given by Mr. Banerjee.  This report was sent  on November 24, 1959.  The Head ice accepted this report and on December   5,  1959,  issued  to  Mr,  Banerjee  the   order terminating  his services.  That, in brief, is the case  set out  by the appellant in support of the action taken  by  it against Mr. Banerjee.  129 The  appellant  had  alleged that  the  termination  of  Mr. Banerjee’s  services was not dismissal but was  a  discharge simpliciter,   and  according  to  it,  the  discharge   was justified by the terms of contract between the appellant and Mr. Banerjee as embodied in Rule 40 (1) of the Service Rules of -the appellant.  The appellant, therefore, urged that the Labour  Court had no jurisdiction to consider the  propriety of the appellant’s action in discharging Mr. Banerjee. The  respondents,  on  the other hand,  contended  that  the discharge   was  not  discharge  simpliciter  but  was,   in substance,  dismissal, and so, it was urged that the  Labour Court  was  entitled  to  consider  the  propriety  of   the appellant’s action.  Basing themselves on the plea that  the discharge  amounted  to dismissal, the  respondents  pleaded that the failure of the appellant to hold an enquiry against Mr.  Banerjee  introduced a serious infirmity in  the  order passed against him; and they argued that the conduct of  the appellant  was  malafide and the dismissal of  Mr.  Banerjee amounted to victimisation. The  Labour Court has found that according to the  terms  of contract  under  which  Mr. Banerjee  was  employed  by  the appellant,  the  appellant  was entitled  to  discharge  Mr. Banerjee  from  its  employment under Rule  40  (1)  of  the Service  Rules;  but it held that merely because  the  order served  on  Mr.  Banerjee  purported  to  be  an  order   of discharge,  that would not exclude the jurisdiction  of  the Labour  Court  to examine the substance of the  matter.   In fact,  Mr.  joshi who appeared for  the  appellant  conceded before the Labour Court that an adjudicating Court can  look into the reasons behind the discharge of an employee.   That is  why  evidence was led by- both the  parties  before  the Labour  Court.  Having considered that evidence, the  Labour Court  has found that the respondents’ plea about  the  mala fides of the

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130 appellant was not proved and it held that the termination of Mr.  Banerjee’s services could not be said to amount  to  an act of victimisation or an unfair labour practice.  Even so, it held that the discharge was not justified, and so, it,has directed the appellant to reinstate Mr. Banerjee.  It is the validity  of this order that is challenged before us by  Mi. Setalvad on behalf of the appellant. The   true  legal  position  about  the  Industrial   Courts jurisdiction  and  authority in dealing with cases  of  this kind  is  no longer in doubt.  It is true  that  in  several cases,  contract  of employment or  provisions  in  Standing Orders  authorise  an industrial employer to  terminate  the service, of his employees. after giving notice for one month or  paying  salary  for one month in  lieu  of  notice,  and normally, an employer may, in a proper case, -be entitled to exercise  the said power.  But where an order  of  discharge passed  by an employer gives rise to an industrial  dispute. the  form of the order by which the employee’s services  are terminated, would not be decisive ; industrial  adjudication would be entitled to examine the substance of the matter and decide whether the termination is in fact discharge  simpli- citer or it amounts to dismissal which has put on the  cloak of  a  discharge simpliciter.  If the  Industrial  Court  is satisfied  that the order of discharge is punitive, that  it is  malafide, or that it amounts to victimisation or  unfair labour practice, it is competent to the Industrial Court  to set  aside  the  order  and in a  proper  case,  direct  the reinstatement   of  the  employee.   In  some   cases,   the termination  of  the employee’s services may appear  to  the Industrial Court to be capricious or so unreasonably  severe that  an inherence may legitimately and reasonably be  drawn that  in  terminating  the services, the  employer  was  not acting bonafide.  The test always has to be whether the  act of the employer is bonafide or not.  If the act is malafide, or appears to be a colourable  131 exercise  of the powers conferred on the employer either  by the  terms  of  contract or by  the  standing  orders,  then notwithstanding   the   form  of   the   order,   industrial adjudication  would examine the substance and  would  direct reinstatement  in a fit case.  This position was  recognised by  the  Labour  Appellate  Tribunal as  early  as  1951  in Buckingham and Carnatic Co. Ltd., v. Workers of the Company, (1), and since then, it has been consistently followed  vide Chartered  Bank, Bombay, v. Chartered Bank Employee’s  Union (2)  ,  and U. B. Dutt & Co. (Private) Ltd. v.  Its  Workmen (3). In  the present case, the Labour Court has made  a  definite finding  in  favour  of -the appellant that  its  action  in terminating  the services of Mr. Banerjee was  not  malafide and did not amount to victimisation.  Even so, it  proceeded to examine the propriety of the said action and came to  the conclusion that Mr. Banerjee’s discharge from employment did not  appear  to  it  to be justified.   In  coming  to  this conclusion,  the Labour Court has given some  reasons  which are  clearly unsupportable.  It has observed, for  instance, that the appellant has not produced any documentary evidence in  support of its allegation against the efficiency of  Mr. Banerjee.   This  is clearly wrong because the  two  reports made  by Mr. Gupta in respect of Mr. Banerjee’s  conduct  do amount  to  documentary  evidence which  cannot  be  lightly brushed  aside.  It has then commented on the fact that  the allegations  made by Mr. Gupta against Mr. Banerjee  on  six counts  are  of  a general character.   This  comment  again

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cannot be justified because Mr. Gupta stated in clear  terms the  defects  in Mr. Banerjee’s work which had come  to  his notice.  These defects are specific and it is idle to refuse to  give  importance to this evidence merely on  the  ground that  no specific instances had been cited.  In  regard  .to the  question as to whether the 20 boxes had been opened  by Mr. Banerjee before he made his report (1) (1951) 11 L.L J. 314.   (2) (1960) 11 L.L.J. 221. (3) (1962)1 L.L J. 374. 132 to the Zonal ice, the Labour Court has observed that on this point..  there is the evidence of Mr. Banerjee against  that of  Mr. Gupta and there was no particular reason to  believe one in preference to the other.  Now, it is clear that  such an  -observation  is  hardly  of any  help  because  it  was necessary for the Labour Court to express its conclusion  on this  point ; it might have believed either Mr. Banerjee  or Mr.  Gupta,  but by saying that there is no reason  why  one should  be believed rather than the other, the Labour  Court left   this   part  of  the  dispute   entirely   undecided. Similarly,  the Labour Court has accepted the fact that  Mr. Gupta   that   called  for  and  received   Mr.   Banerjee’s explanation and to that extent it has rejected Mr. Banerjee’ suggestion that he had not given any explanation a all ; but even  so, the Labour Court has not considered the effect  of this conclusion on the main controversy between the parties. In  our opinion, therefore, the-reasons given by the  Labour Court in support of its conclusion that the discharge of Mr. Banerjee was not justified are wholly unsatisfactory and so, it  has  become  necessary for us to  examine  the  evidence ourselves. The  first  report made by Mr. Gupta  expressly  states  six grounds  on  which  Mr.  Banerjee’s work  was  found  to  be unsatisfactory.   Mr. Gupta took the view that Mr.  Banerjee was  very  slow in his work as a Salesman, that he  was  not able  to judge the capacity of the dealers and to give  them sufficient stocks in time, that he took no steps to put  the products of the appellant on prominent view in the  dealers’ shops,  that  he wag not looking after the  pasting  of  the posters,  in fact in one place the poster was pasted  upside down, that he was not educating the stockists and dealers as he could have done and that he was reluctant to put hard and intelligent  work.  It is remarkable that when Mr.  Banerjee was asked about this report in cross-examination, he frankly stated that  133 Mr.  Gupta was not unfriendly towards him and he was  really unable  to say why Mr. Gupta should have made these  adverse comments against his work.  In fact, the Labour Court itself has  found  that  the  appellant was  not  actuated  by  any ulterior  considerations in discharging Mr. Banerjee.   This report  was  made by Mr. Gupta soon after he  inspected  Mc. Banerjee’s  work and there is no reason, whatever,  why  the Labour  Court  should  have been reluctant  to  accept  this report. Confining  ourselves  to  the  main  complaint  against  Mr. Banerjee  that he had not examined even a single box  before he  reported  that the contents of the said boxes  were  not marketable, Mr. Gupta expressly stated that he had seen  the 20 boxes and found that none of them had been opened at all. They were intact in the company’s packing with the straps on them.  Mr Gupta got them opened and found that the  contents to  the extent of 5 cases were really damaged and  that  the remaining contents were alright and could be marketed at the company’s prices.  Mr. Banerjee stated in his evidence  that

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he  had  all the cases opened and he added, as he.  had  to, that  the  said  cases were repacked  for  avoiding  further deterioration.  When he was asked how that could be done, he agreed  that the metal straps had to be removed for  opening of the boxes, but he added that he had arranged to have them restrapped  and nailed.  It is clear that the  strapping  is done  in  a  factory by machines.   Mr.  Banerjee,  however, suggested  that  he could manage to get the straps  put  and nailed  with hands.  This evidence is  patently  unreliable. Besides, it is significant that when he gave his explanation to Mr. Gupta Mr. Banerjee admitted that he had opened only 5 or  6  out  of the 20 boxes in question  though  his  report suggested  that he had opened all the 20 boxes.   Therefore, there  can  be  no  doubt that  Mr.  Gupta’s  statetment  is absolutely  true and that Mr. Banerjee had made  his  report about the 134 unsatisfactory  condition  of the contents of the  20  boxes without as much as opening any one of them.’ That being  so, it  is  difficult to understand how the Labour  Court  could -have come to the conclusion that the order of discharge was not justified. The  learned Solicitor-General, however, attempted     to argue that there was nothing on the record to     show  that the 20 boxes which Mr. Gupta got opened were the same  boxes in respect of which Mr. Banerjee had made his report.  We do not  think that having regard to the evidence given  by  Mr. Gupta  and Mr. Banerjee and the explanation’ offered by  the latter when he was called to Calcutta by Mr. Gupta, there is any  room  for such an ingenious suggestion.   Both  parties knew that they were talking about the same 20 boxes and so,, it  is  futile now to suggest that the 20  boxes  which  Mr. Gupta  examined were different from the boxes in respect  of which  Mr.  Banerjee  had  made his  report.   It  was  also suggested  on behalf of the respondents that Mr.  Gupta  did not  admit  that  he  had received  some  letters  from  Mr. Banerjee  in  which he had complained that  owing  to  heavy rains, conditions were not favourable for effective work  in the  area entrusted to him.  It is true that when Mr.  Gupta was  asked about these letters, he said he did not  remember if  he had received them.  We do not think that the  answers given by Mr. Gupta in respect of these letters can be of any assistance  to the respondents in discrediting  Mr.  Gupta’s evidence in any manner.  On the whole, we have no hesitation in holding that the appellant acted bonafide in  discharging Mr. Banerjee’s services when it accepted Mr. Gupta’s  report and  concurred  with his conclusions  that  the  explanation given by Mr. Banerjee was not satisfactory. The result is, the appeal is allowed and the order passed by the Labour Court directing the  135 appellant  to reinstate Mr. Banerjee is set aside.   In  the circumstances  of  the case, there would be no order  as  to costs. Appeal allowed.